WEBVTT - Why Africa’s Population Boom Could Power Its Next Growth Era 0:00:02.720 --> 0:00:07.240 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.039 --> 0:00:11.399 The biggest unknown in Africa is the extent to which 0:00:12.039 --> 0:00:19.480 governance will respond to thicker populations, greater growth, greater capacity 0:00:19.520 --> 0:00:23.639 to raise taxes and therefore expand the capabilities of government. 0:00:23.880 --> 0:00:28.480 To What extent will African governments respond to this more benign, 0:00:28.720 --> 0:00:40.239 positive environment and up their game. 0:00:40.760 --> 0:00:43.000 Welcome to Marrion Dogs Money, the podcast in which people 0:00:43.000 --> 0:00:45.040 who know the markets explain the markets. 0:00:45.159 --> 0:00:46.280 I'm Marry in Sunset Web. 0:00:46.560 --> 0:00:48.240 This week we are focusing on one of the most 0:00:48.280 --> 0:00:54.520 misunderstood and often oversimplified dimensions of economic development population. Just 0:00:54.560 --> 0:00:57.800 add Wealth, journalist and author of How Africa Works, Success 0:00:57.880 --> 0:01:01.200 and Failure on the World's Last Development Frontier, joins me 0:01:01.280 --> 0:01:05.080 today and we talk about how population dynamics shape Africa's 0:01:05.120 --> 0:01:08.640 economic trajectory, not just in terms of size, but also structure. 0:01:08.760 --> 0:01:12.880 And we talk about how demographics can influence industrialization, urbanization, 0:01:13.360 --> 0:01:17.280 and political stability. Joe, Welcome to Marin Talks Money. 0:01:18.040 --> 0:01:18.959 Thank you for having me. 0:01:20.000 --> 0:01:21.920 The first thing to say, I guess is that a 0:01:21.920 --> 0:01:25.280 book that is just about Africa is a little all encompassing. 0:01:25.319 --> 0:01:27.440 Africa is full of, you know, so many different countries, 0:01:27.480 --> 0:01:30.680 different cultures, different languages, endless, different things going on. So 0:01:31.640 --> 0:01:34.000 I suppose the first thing we should talk about is 0:01:34.080 --> 0:01:37.200 to what extent is it really possible to generalize about 0:01:37.280 --> 0:01:39.920 a continent that is so huge and so diverse. 0:01:40.280 --> 0:01:43.280 You're right, but we generalize about Asia and talking about 0:01:43.319 --> 0:01:46.520 Asia at the same time, and there's almost as much 0:01:46.600 --> 0:01:50.560 diversity in Asia. So I think we have to recognize 0:01:50.560 --> 0:01:53.200 that that fifty five countries are very different in Africa, 0:01:53.240 --> 0:01:57.000 but nonetheless there they are on this vast land mass 0:01:57.680 --> 0:02:02.640 together and their economies are going to evolve with close 0:02:02.720 --> 0:02:06.600 relations with each other as we go forward. So there 0:02:06.720 --> 0:02:10.440 is to my mind still a value in talking economically 0:02:10.440 --> 0:02:13.160 about Africa, and you can sort of see that in 0:02:13.280 --> 0:02:16.120 terms of what's happening within the continent, because there was 0:02:16.200 --> 0:02:20.840 a trend to put the Arab states in with the 0:02:20.880 --> 0:02:24.320 Middle East over the last sort of thirty forty years, 0:02:24.400 --> 0:02:28.400 so and not count North Africa really as part of Africa, 0:02:28.440 --> 0:02:31.280 but the North African countries themselves, now that there is 0:02:31.720 --> 0:02:35.720 some economic traction in Sub Saharan Africa, are starting to 0:02:35.760 --> 0:02:39.880 talk about themselves as being fundamentally African states. 0:02:40.160 --> 0:02:43.400 Okay, So when you went into this, because your last 0:02:43.480 --> 0:02:46.440 very well known book was How Asia Works into How 0:02:46.600 --> 0:02:49.920 Africa Works. It's a bit of a shift. Did you 0:02:50.000 --> 0:02:53.600 go into this with an expectation of what you would find? 0:02:54.200 --> 0:02:57.440 I didn't go with an expectation of what I would find. 0:02:57.520 --> 0:03:00.720 I thought that there might be something different about what 0:03:00.919 --> 0:03:04.440 was required in Africa in policy terms. I think that's 0:03:04.520 --> 0:03:10.080 about as much of a predisposition as I had. I mean, 0:03:10.120 --> 0:03:12.679 I started out by reading through the academic literature, and 0:03:12.720 --> 0:03:15.080 so I went through all the literature on governance, failure 0:03:15.120 --> 0:03:19.000 of which has a huge amount in Africa, corruption, kleptocracy, 0:03:19.600 --> 0:03:23.359 civil strife, ethnic strife. But I got to the end 0:03:23.400 --> 0:03:25.880 of reading all that feeling that I hadn't really got 0:03:26.040 --> 0:03:30.440 an argument about what the fundamental reason was why Africa's 0:03:30.520 --> 0:03:33.920 development had lagged as much as it as it has. 0:03:34.560 --> 0:03:37.360 And that's what took me on to the demographic stuff 0:03:37.400 --> 0:03:38.440 that I got to eventually. 0:03:38.680 --> 0:03:41.360 Okay, so you felt that all these things that're sort 0:03:41.360 --> 0:03:46.160 of relentless debt, the conflict, ethnic conflict in particular, the 0:03:46.400 --> 0:03:48.800 corruption and cryptocracy, etcetera, and none of these things were 0:03:49.520 --> 0:03:52.880 in themselves enough to explain why Africa has not been 0:03:52.920 --> 0:03:54.680 able to develop in the same way as other areas. 0:03:55.000 --> 0:04:01.640 Yeah, often symptomatic rather than fundamental reasons for development failure, 0:04:01.680 --> 0:04:03.400 if you like. It was when I got to the 0:04:03.400 --> 0:04:05.800 demographics that I felt that I found something that had 0:04:06.040 --> 0:04:09.360 much more powerful explanatory potential. 0:04:09.080 --> 0:04:12.240 When you looked at Asia. Was that something that stood 0:04:12.240 --> 0:04:14.280 out to you at the time, or did that come later? 0:04:14.440 --> 0:04:16.359 Was it only when you started looking at Africa that 0:04:16.400 --> 0:04:19.200 you looked back at Asia and thought, well, that already 0:04:19.240 --> 0:04:22.520 had this population density or did it not really come up? Then? 0:04:23.160 --> 0:04:31.800 One always discuss demographics in Asia because it was it 0:04:31.839 --> 0:04:35.080 was always relevant, but you didn't discuss it that much 0:04:35.120 --> 0:04:38.039 because it was never a problem. Asia in nineteen sixty 0:04:38.160 --> 0:04:41.960 always had a sufficient demographic density to be able to 0:04:42.000 --> 0:04:46.640 pay for its infrastructure, to have deep concentrated urban markets, 0:04:46.880 --> 0:04:49.159 to raise taxism, in all of the stuff that you 0:04:49.240 --> 0:04:52.920 need to do developmentally. So I had never thought, in 0:04:54.120 --> 0:04:58.960 two three decades working in Asia of demographics as something 0:04:59.000 --> 0:05:03.480 that could fundamental constrain economic development. It was just a 0:05:03.560 --> 0:05:04.919 sort of marginal variable. 0:05:05.320 --> 0:05:07.520 Let's talk about how it can constrain them. What is 0:05:07.560 --> 0:05:09.480 it about population density that makes it different? 0:05:09.960 --> 0:05:13.560 Well, when you have super low population density, is you 0:05:13.600 --> 0:05:15.640 did in Africa? If you go back to the end 0:05:15.680 --> 0:05:18.640 of the Second World War, Africa is this vast land 0:05:18.720 --> 0:05:23.479 mass into which you can fit China, India, Europe and 0:05:23.520 --> 0:05:25.359 the US. And it's hard to believe, but if you 0:05:25.440 --> 0:05:27.800 cut the countries out of an atless and try, you'll 0:05:27.800 --> 0:05:31.120 find that that's correct. That's how vast Africa is. And 0:05:31.160 --> 0:05:34.359 yet it had only two hundred and twenty million people 0:05:34.400 --> 0:05:37.040 at the end of the Second World War. The constraint 0:05:37.080 --> 0:05:40.159 that produces is that you get population density averaged over 0:05:40.600 --> 0:05:44.280 Africa of less than ten people per square kilometer. You 0:05:44.320 --> 0:05:46.279 think of the size of a square kilometer and only 0:05:46.320 --> 0:05:49.719 ten people in it. It's very few. And the impact 0:05:49.800 --> 0:05:53.680 that this has economically is well, you don't have markets. 0:05:53.720 --> 0:05:57.240 You don't have meaningful concentrated markets. So if you think 0:05:57.440 --> 0:06:02.320 nineteen hundred for Africa, the two biggest cities were Legos 0:06:02.360 --> 0:06:05.840 and DRIs Salam, and they had populations of twenty thousand people. 0:06:05.920 --> 0:06:09.680 And this is a time when cities like Singapore or 0:06:09.720 --> 0:06:12.560 Shanghai and East Asia had a quarter a million or 0:06:12.600 --> 0:06:15.799 half a million in the case of Singapore. So it's 0:06:15.839 --> 0:06:18.440 just a different order of magnitude. So you haven't got 0:06:18.480 --> 0:06:23.480 concentrated centers of population to demand goods and will reliably 0:06:23.480 --> 0:06:26.520 pay for goods and services. And also cities have always 0:06:26.560 --> 0:06:30.159 been very, very important historically as places to raise tax. 0:06:30.200 --> 0:06:33.359 It's always been much easier to get tax off urbanites 0:06:33.400 --> 0:06:37.080 than it is off people living in a dispersed condition 0:06:37.160 --> 0:06:40.200 in the countryside. So that problem, and then you've the 0:06:40.200 --> 0:06:42.520 problem that you've got to have infrastructure to have a 0:06:42.520 --> 0:06:45.360 modern economy, and you can look you look at infrastructure 0:06:45.360 --> 0:06:49.120 costs per capita, and Africa in nineteen sixty can't afford anything, 0:06:49.320 --> 0:06:53.480 can't afford rows, can't afford power networks, kind of bored 0:06:53.520 --> 0:06:56.680 irrigation systems, any of the things. You know, there are 0:06:56.720 --> 0:06:59.799 things that get built, usually with sort of foreign foreign aid, 0:07:00.040 --> 0:07:06.600 but there's nothing is affordable within the internal capability of 0:07:06.960 --> 0:07:10.800 African governments. So you're just totally constrained. And you know, 0:07:10.840 --> 0:07:14.640 if you want the cross the historical comparison for the 0:07:14.640 --> 0:07:18.720 population density, that of Africa in nineteen sixty was equivalent 0:07:18.760 --> 0:07:21.400 to Europe in fifteen hundred, and so then we ask 0:07:21.480 --> 0:07:23.880 how much growth was there in Europe in fifteen hundred, Well, 0:07:23.880 --> 0:07:27.120 there wasn't only so why did we think that there 0:07:27.200 --> 0:07:31.280 was going to be lots of growth in Africa? Yes, 0:07:31.360 --> 0:07:32.960 I think it was. You know, some of the things 0:07:32.960 --> 0:07:34.640 that were said in the sixties and the seventies about 0:07:34.640 --> 0:07:38.520 what Africa could do were frankly crazy and were really 0:07:38.560 --> 0:07:43.000 just based around some mineral investments, and people thought that 0:07:43.040 --> 0:07:46.880 these mineral enclaves were going to translate into broad economic development, 0:07:47.800 --> 0:07:52.360 which they don't anywhere in the world because mineral economies 0:07:53.080 --> 0:07:56.360 employ very few people and they are genuine enclaves cut 0:07:56.400 --> 0:07:58.640 off from the rest of the economy. And I'm not 0:07:58.640 --> 0:08:00.800 saying that you shouldn't dig up your minerals. You should 0:08:00.800 --> 0:08:02.920 dig up your minerals, but they do not lead to 0:08:02.960 --> 0:08:04.480 broad based economic developments. 0:08:05.000 --> 0:08:08.200 Okay. So the argument is that now much of Africa 0:08:08.280 --> 0:08:11.480 has reached the level of population deentity that Southeast Asia 0:08:11.560 --> 0:08:15.280 had already hit in the sixties, and that should be 0:08:15.440 --> 0:08:20.280 the thing that suddenly pushes economic growth higher. And one 0:08:20.280 --> 0:08:22.240 of the things you talk about in the book is 0:08:22.280 --> 0:08:26.080 that this tends to start with fast rises in agricultural growth, 0:08:26.120 --> 0:08:29.720 particularly agricultural productivity, and we're already seeing that. 0:08:30.160 --> 0:08:33.040 Yeah. So that's I think the biggest sort of or 0:08:33.080 --> 0:08:36.040 the hardest evidence for optimism, if you like, in the 0:08:36.080 --> 0:08:39.520 book would be what's been going on in agriculture since 0:08:39.559 --> 0:08:43.040 the mid nineties. But to make things more straightforward, I 0:08:43.120 --> 0:08:48.440 provide data from two thousand onwards, since when agricultural growth 0:08:48.440 --> 0:08:52.120 in Africa as a whole has been an over four 0:08:52.160 --> 0:08:56.760 percent a year, highest rate in the world, and in 0:08:57.200 --> 0:09:00.679 you know, many countries a lot higher than that. Nigeria 0:09:00.760 --> 0:09:02.920 has been doing six percent a year. And it's not 0:09:02.960 --> 0:09:06.200 because the government has got great agriculture policy. It's because 0:09:06.559 --> 0:09:10.320 of the density of the population. And what's happened in 0:09:10.320 --> 0:09:14.960 Africa is that as population has doubled approximately in twenty 0:09:15.000 --> 0:09:17.920 five years, because there's been a bit of economic growth 0:09:17.960 --> 0:09:22.240 as well, demand for food by value has tripled. That 0:09:22.480 --> 0:09:29.800 drives the production of crops that's good for ordinary people, 0:09:29.960 --> 0:09:35.079 small holder farmers, but particularly in peri urban areas. So 0:09:35.480 --> 0:09:39.679 African agriculture is becoming very bifurcated now between people who 0:09:39.720 --> 0:09:45.000 are farming around cities, of which there are over seven 0:09:45.120 --> 0:09:49.800 thousands designated cities in Africa now people who are farming 0:09:49.800 --> 0:09:52.600 in those areas because the urban demand is so relentless, 0:09:52.679 --> 0:09:58.000 so reliable, that you can grow relatively value added crops 0:09:58.040 --> 0:10:00.560 things like tomatoes instead of what you would have grown 0:10:00.880 --> 0:10:03.360 in the deep countryside, and you can sell it, and 0:10:03.400 --> 0:10:06.400 you can make thousands of dollars per hector, and you 0:10:06.440 --> 0:10:09.320 can afford to buy little pumps and irrigate your soil, 0:10:09.360 --> 0:10:12.440 and that will allow you to increase yields. At the 0:10:12.440 --> 0:10:13.920 same time as that is going on in a lot 0:10:13.920 --> 0:10:17.679 of places in deep rural Africa where nothing has changed yet. 0:10:17.720 --> 0:10:20.880 And across Africa, is agricultural production keeping up with population 0:10:20.920 --> 0:10:23.360 growth because these are really fast growing populations. 0:10:23.440 --> 0:10:27.160 Now, yes, it is so. By value, agricultural output is, 0:10:27.480 --> 0:10:29.959 as I said, going up over four percent a year. 0:10:30.320 --> 0:10:34.760 Population is going up less than three. So population growth 0:10:34.800 --> 0:10:39.440 is slowing more slowly than it did in East Asia, 0:10:39.920 --> 0:10:44.040 but it is nonetheless slowing. And in some African countries 0:10:44.800 --> 0:10:45.960 there's a lot of variation. 0:10:46.200 --> 0:10:48.280 So fertility rates are falling in Africa in the same 0:10:48.280 --> 0:10:49.520 way as there every wh else, not to the e 0:10:49.559 --> 0:10:51.960 same extent, obviously, but they are still falling. 0:10:52.240 --> 0:10:54.520 They're falling, but they're coming down from a high level. 0:10:55.080 --> 0:10:58.720 And so this means that it will be some time 0:10:58.880 --> 0:11:03.200 before Africa gets its demographic dividend, in other words, where 0:11:03.200 --> 0:11:06.840 it gets a very large share of working people relative 0:11:06.880 --> 0:11:11.160 to kids and older people. To my mind, one of 0:11:11.200 --> 0:11:15.200 the most useful things that the what remains that the 0:11:15.240 --> 0:11:19.040 aid industry can do in Africa is to put money 0:11:19.080 --> 0:11:23.040 into female education because that is very closely correlated with 0:11:23.280 --> 0:11:28.520 lifetime fertility. I even girls who just do primary school 0:11:29.200 --> 0:11:34.080 have a massively reduced propensity to have lots of kids 0:11:34.120 --> 0:11:38.640 during their lifetime. And it's economically very important because the 0:11:38.720 --> 0:11:42.160 bigger and longer the demographic dividend, the better it is 0:11:42.160 --> 0:11:43.520 obviously for African development. 0:11:43.559 --> 0:11:47.040 Okay, but interesting, So we don't necessarily want fertility where's 0:11:47.120 --> 0:11:50.360 to fall in Africa though, I mean it based on 0:11:50.640 --> 0:11:53.440 this idea of population density, you would want populations to 0:11:53.440 --> 0:11:57.000 increase for some time to come to produce that population dividend. 0:11:57.320 --> 0:11:59.960 No, I mean, I think that this is not a 0:12:00.080 --> 0:12:02.560 perfect science. But to my mind, once you get beyond 0:12:02.679 --> 0:12:06.360 sort of fifty sixty seventy people per square kilometer on average, 0:12:06.360 --> 0:12:09.360 obviously your your urban densities are massively higher than that, 0:12:10.120 --> 0:12:13.760 then reducing population growth abruptly in order to maximize the 0:12:13.760 --> 0:12:17.640 demographic dividend makes sense. It's not the case that there's 0:12:17.640 --> 0:12:20.880 a direct correlation that the more people you get, the 0:12:20.920 --> 0:12:24.120 better it is for forever and forever. It's about having 0:12:24.120 --> 0:12:27.200 a minimum, a minimum density of people. That means that 0:12:27.240 --> 0:12:29.960 you can afford the infrastructure that you have, the markets 0:12:30.360 --> 0:12:34.200 that you've got, the division of labor that's required to 0:12:34.280 --> 0:12:36.640 do complex things efficiently. 0:12:36.880 --> 0:12:39.440 Okay, so fifty sixty is around ideal. I mean, I 0:12:39.440 --> 0:12:41.360 know it's not a precise science. 0:12:41.080 --> 0:12:44.080 But it's not a perfect science. And I'm just making 0:12:44.200 --> 0:12:47.360 historical analogies with what the case was in Asia. But 0:12:47.840 --> 0:12:50.880 I'm saying that clearly, you know, nine to ten was 0:12:51.040 --> 0:12:54.160 way too low. You know, fifty sixty work for Asia. 0:12:54.240 --> 0:12:57.679 But having been fifty sixty in Asia, it then tripled 0:12:57.720 --> 0:13:01.080 over the next seventy years. In any STAGEA, it's now 0:13:01.120 --> 0:13:04.280 around one hundred and fifty. But Africa will go to 0:13:04.600 --> 0:13:08.679 one hundred and fifty on its current population trajectory. I mean, 0:13:08.679 --> 0:13:10.760 there's going to be four billion people at the end 0:13:10.760 --> 0:13:13.800 of the century in Africa, and there'll be four billion 0:13:13.840 --> 0:13:17.880 people in Asia, and there will be only two billion 0:13:17.880 --> 0:13:20.040 people in the rest of the world, if the UN's 0:13:20.120 --> 0:13:21.520 projections are to be believed. 0:13:21.840 --> 0:13:23.440 Aren't I mean, they're mostly out by quite a lot, 0:13:23.480 --> 0:13:30.079 aren't They generally get precise? I mean, they keep changing. 0:13:30.120 --> 0:13:40.640 The idea of a peak global populations that started. Let's 0:13:40.679 --> 0:13:43.560 go back actually to education, because I know that one 0:13:43.600 --> 0:13:45.439 of the things that you also say is that people 0:13:45.520 --> 0:13:48.640 underestimate how well educated Africa's population is and therefore how 0:13:48.679 --> 0:13:51.800 ready it is for economic growth. And obviously efficient education 0:13:51.880 --> 0:13:55.079 is also a function of population identity to a degree, 0:13:55.240 --> 0:13:56.880 but it's underappreciated, isn't it. 0:13:57.520 --> 0:14:00.600 Yeah, I think that what African government's managed to do 0:14:00.760 --> 0:14:06.760 post nineteen sixty in education is really underreported and was 0:14:06.880 --> 0:14:10.079 very important. So I mean again, it was this very 0:14:10.120 --> 0:14:13.480 low population density that meant that colonial governments couldn't raise 0:14:13.520 --> 0:14:16.160 tax either. So their response to not being able to 0:14:16.280 --> 0:14:20.440 raise any significant tax was to not run schools. And 0:14:20.480 --> 0:14:23.640 there were no schools bar missionary schools in Africa until 0:14:23.640 --> 0:14:26.360 the nineteen fifties, I mean one or two tiny exceptions, 0:14:26.360 --> 0:14:29.520 so that obviously South Africa was an exception, Mauritius was 0:14:29.560 --> 0:14:33.800 an exception, but elsewhere there are no schools until the fifties. 0:14:34.280 --> 0:14:37.800 And so in nineteen sixty Africa comes into the independence 0:14:37.880 --> 0:14:43.000 era with a literacy rate of sixteen one six percent 0:14:43.040 --> 0:14:48.640 and a female literacy rate of five percent. And this makes, 0:14:48.880 --> 0:14:53.800 you know, modern economic activity really close to impossible, and 0:14:54.040 --> 0:15:00.680 African governments put huge resources into opening schools after nineteen 0:15:00.720 --> 0:15:03.440 sixty and the World Bank in the seventies did a 0:15:03.480 --> 0:15:05.880 review of what had been done and said, nowhere in 0:15:05.920 --> 0:15:10.600 the world has built education systems as fast as Africa. 0:15:10.640 --> 0:15:15.600 I mean this genuinely extraordinary what has been achieved here, 0:15:15.840 --> 0:15:17.680 you know. And if you take a single country example, 0:15:17.680 --> 0:15:22.680 I mean someone like Julius Nareerri running Tanzania after independence. 0:15:22.720 --> 0:15:28.000 He inherited a country with a literacy rate of fifteen 0:15:28.440 --> 0:15:32.480 percent and by the mid eighties literacy was up to 0:15:32.560 --> 0:15:35.840 over eighty percent. So all that has been very important. 0:15:36.000 --> 0:15:42.080 And without that educational progress, I don't think that the 0:15:42.280 --> 0:15:47.720 thickening of populations would be producing the pick up in 0:15:47.840 --> 0:15:51.200 growth that we've been seeing since the turn of the century. 0:15:51.240 --> 0:15:54.400 Okay, so outside agriculture, where is the growth coming from? 0:15:54.400 --> 0:15:55.200 The big drivers? 0:15:55.480 --> 0:15:57.600 Well, I think you've got to sort of add that 0:15:57.640 --> 0:16:01.520 there's the other bit of agriculture, the manufacturing end of agriculture, 0:16:01.520 --> 0:16:03.920 which we always forget about because we always think agriculture 0:16:03.920 --> 0:16:07.240 is about farmers. But of course once you've produced the crops, 0:16:07.720 --> 0:16:09.560 then the crops have got to be milled, they've got 0:16:09.600 --> 0:16:12.000 to be turned into processed foods. There has been a 0:16:12.080 --> 0:16:17.240 colossal boom in process foods in Africa all across Africa 0:16:17.320 --> 0:16:21.880 in the last twenty five years. Most Africans now eat 0:16:22.320 --> 0:16:27.960 African produced processed foods and they're very local to local taste. 0:16:28.000 --> 0:16:30.120 I mean, what Nigerians eat even in one body of 0:16:30.240 --> 0:16:33.320 Nigeria is not what Nigerians buy in another part, and 0:16:33.360 --> 0:16:36.880 there's certainly not they what they buy in different areas 0:16:36.920 --> 0:16:41.280 of Africa. And that has meant a fantastic boom in 0:16:41.760 --> 0:16:47.360 the manufacturing end of agriculture. And it's reckoned that around 0:16:47.440 --> 0:16:50.800 half of all the capital expenditure and manufacturing in Africa 0:16:50.840 --> 0:16:55.440 at the moment is going on agricultural processing. So there's that, 0:16:56.080 --> 0:16:58.520 and then you have it's very variable by country. You 0:16:58.560 --> 0:17:04.440 have the beginnings of some greater amount of other manufacturing 0:17:04.520 --> 0:17:07.080 in Africa. But this is a return if you look 0:17:07.080 --> 0:17:09.560 at it as a share of GDP, it's sort of 0:17:09.960 --> 0:17:13.240 bottoming out and going up and hopefully heading back towards 0:17:13.280 --> 0:17:15.960 where we were in the seventies. At the end of 0:17:16.000 --> 0:17:20.840 the seventies, and that is because after independence, when economies 0:17:20.840 --> 0:17:23.240 were much smaller, African governments put a lot of money 0:17:23.280 --> 0:17:29.120 into manufacturing projects and they almost all failed again largely 0:17:29.320 --> 0:17:34.040 would fail because for demographic reasons. In nineteen sixty labor rates, 0:17:34.359 --> 0:17:37.080 factory labor rates in Africa were twice what they were 0:17:37.080 --> 0:17:40.719 in Asia. It seems extraordinary. That's the supply and demand 0:17:40.840 --> 0:17:45.760 of human labor. But now wage rates if you compare 0:17:45.760 --> 0:17:49.360 with China, so China's at about six hundred dollars per 0:17:49.440 --> 0:17:53.480 month for factory labor now and if you compare with that, 0:17:53.720 --> 0:17:58.040 different African countries are between half and one tenth, so 0:17:58.080 --> 0:18:00.840 that the cheapest will be places like Muddy Gasca or 0:18:00.880 --> 0:18:06.440 Ethiopia sixty bucks a month for a factory worker. Of course, 0:18:06.440 --> 0:18:11.159 that's bringing in some some investment. And the leaders in 0:18:11.200 --> 0:18:15.360 the manufacturing investment if you think of FDI are the Chinese. 0:18:15.840 --> 0:18:18.439 There was a piece in The Economist last week or 0:18:18.480 --> 0:18:22.480 the week before talking about this. It's reckoned based on 0:18:22.520 --> 0:18:25.639 the fts on the Financial Times FDI database, which is 0:18:25.720 --> 0:18:28.840 micro level firm by firm. It's reckoned that the Chinese 0:18:28.880 --> 0:18:33.359 put twelve over twelve billion into manufacturing investment in China 0:18:33.440 --> 0:18:36.720 last year. And most of it is because profit rates 0:18:36.760 --> 0:18:39.320 are pretty low in China. Now, you know, things are 0:18:39.359 --> 0:18:42.040 so competitive, and they come and they look at Africa 0:18:42.240 --> 0:18:46.040 and you know often people are seeing products that are 0:18:46.119 --> 0:18:49.440 priced three, four, five times what they cost in China, 0:18:49.480 --> 0:18:54.879 and so Chinese investment is coming chasing better returns, and 0:18:54.920 --> 0:18:58.280 it's a sort of a slow a slow build. It's 0:18:58.320 --> 0:19:01.720 not held by the fact that African go moments don't 0:19:01.760 --> 0:19:06.840 recognize that manufacturing is something that you just cannot develop 0:19:07.400 --> 0:19:11.840 quickly without because it's massively the most efficient way to 0:19:11.920 --> 0:19:15.720 take your rural population into the modern economy. There's just 0:19:15.800 --> 0:19:20.080 no kind of there's no sort of political commitment really 0:19:20.119 --> 0:19:23.320 to manufacturing in Africa, although the African Union has tried 0:19:23.359 --> 0:19:27.800 to ferment one, but nonetheless manufacturing is going on. And 0:19:27.800 --> 0:19:32.720 when you go and visit manufacturing, harbs, manufacturing enclaves in Africa, 0:19:33.560 --> 0:19:35.840 each of the one so you know, I went to Lasutu, 0:19:36.080 --> 0:19:39.920 to Madagascar, to Morocco, and in each of these places 0:19:40.160 --> 0:19:42.440 you just think, well, there's no real reason why there 0:19:42.440 --> 0:19:44.919 can't be a lot more of this here because the 0:19:45.240 --> 0:19:49.760 labor is it starts off massively less productive than in China, 0:19:49.840 --> 0:19:54.840 but it goes up a fairly steep curve and you know, 0:19:54.880 --> 0:19:58.200 in one to two years, people running factories generally are 0:19:58.960 --> 0:20:02.080 happy with with the productivity that they're getting. 0:20:02.200 --> 0:20:05.240 And what other similarities would there be. We're talking about 0:20:05.240 --> 0:20:08.480 this transfer of manufacturing from China and parts of Southeast 0:20:08.480 --> 0:20:11.399 Asia into Africa now, but if you look at the 0:20:11.400 --> 0:20:14.639 way that the Southeast Asian economies developed during that period 0:20:14.680 --> 0:20:19.080 of sixties, seventies, eighties, what the similarities do you expect 0:20:19.080 --> 0:20:21.520 there to be with the African economies in if you 0:20:21.560 --> 0:20:24.360 remember those Southeast Asian economies in the beginning, where we're 0:20:24.440 --> 0:20:29.040 very closed, you know, lots of tariffs and regulations and 0:20:29.280 --> 0:20:35.119 lots of capital controls even to keep growth internalized. Is 0:20:35.160 --> 0:20:38.240 that the way you expect to see the African economies 0:20:38.280 --> 0:20:38.800 go as well. 0:20:39.040 --> 0:20:42.720 I mean, if we're talking in a very geographically specific 0:20:42.800 --> 0:20:45.720 way about Southeast Asia and we're thinking about countries like 0:20:45.760 --> 0:20:48.760 Indonesia and the Philippines, then I think that Africa will 0:20:48.800 --> 0:20:52.640 be more like that than it will like the Northeast 0:20:52.640 --> 0:20:56.520 Asian countries with the sort of super competent governments in 0:20:56.600 --> 0:21:02.199 Japan and Korea and China and day Vietnam. So I 0:21:02.200 --> 0:21:05.680 think it will be more like traditional Southeast Asia. And 0:21:05.760 --> 0:21:09.080 you can already see certain things. So going back to 0:21:09.119 --> 0:21:12.720 the businesses that I was talking about that have come 0:21:12.800 --> 0:21:17.520 out of agriculture, the agricultural manufacturers and processors. You can 0:21:17.560 --> 0:21:21.080 already see them evolving in the way that a company 0:21:21.240 --> 0:21:24.800 like CP Group did in Thailand or Salim Group did 0:21:24.840 --> 0:21:28.640 in Indonesia, that they get these cash flows, very good 0:21:28.680 --> 0:21:31.800 cash flows out of agricultural processing. I mean Salem was 0:21:31.840 --> 0:21:35.240 making noodles, CP was doing seeds, and then they take 0:21:35.320 --> 0:21:39.720 that money and they build these kind of Christmas tree conglomerates. 0:21:40.240 --> 0:21:42.840 And you can see this happening already in Africa. So 0:21:42.880 --> 0:21:48.400 in Tanzania you have Buckrazer as the biggest agribusiness enterprise 0:21:48.840 --> 0:21:52.720 and they operate across ten countries now and they're doing 0:21:52.760 --> 0:21:56.000 all our agri business and they're basically millers. But on 0:21:56.080 --> 0:22:00.439 top of that, they've also now got hydrofoil businessiness is 0:22:00.480 --> 0:22:04.240 going out a Zanzibar, They've got real estate, they've got 0:22:04.240 --> 0:22:08.320 a TV station, they've got a football club, and you know, 0:22:08.359 --> 0:22:11.320 with a kind of oligarch at the top, it all 0:22:11.400 --> 0:22:14.600 feels to me quite Southeast Asian, and I think that 0:22:15.280 --> 0:22:17.800 I think that much of Africa will go in that 0:22:17.920 --> 0:22:22.760 kind of direction. It's way less efficient developmentally than what 0:22:22.800 --> 0:22:25.359 you get in in a Vietnam or a China or 0:22:25.440 --> 0:22:30.320 a Japan but it's not bad. Still progress, It's still progress. 0:22:30.440 --> 0:22:34.800 Yeah. Should we worry about a commodity supercycle? And that 0:22:35.440 --> 0:22:38.320 much conversation these days about sharply rising prices of commodities 0:22:38.320 --> 0:22:42.000 across the board copper, silver, or pladium, that rare earth metals, 0:22:42.000 --> 0:22:45.439 et cetera. And you know, there is the resource curse, 0:22:45.480 --> 0:22:47.720 isn't there? If there is another commodity supercycle and we 0:22:47.760 --> 0:22:51.359 see all these prices going up massively, is that good 0:22:51.359 --> 0:22:54.720 for long term growths Africa or is it a problem? 0:22:55.119 --> 0:22:57.560 How good it is depends on how well the money 0:22:57.640 --> 0:23:01.040 is used, and in previous cycles that the money hasn't 0:23:01.119 --> 0:23:04.480 been well used, which is why I'm so happy to 0:23:04.520 --> 0:23:10.960 see this demographically driven growth in agriculture producing more stable developments. 0:23:11.000 --> 0:23:12.560 I mean, you can look at you know, if you 0:23:12.560 --> 0:23:15.879 look at African growth since twenty fourteen, the end of 0:23:15.920 --> 0:23:22.000 the China boom, Africa didn't collapse into acute negative growth 0:23:22.000 --> 0:23:26.000 as it did after previous cycles. And my feeling is 0:23:26.000 --> 0:23:27.840 that a lot of that is down to the fact 0:23:27.840 --> 0:23:31.320 that now, you know, you've just got this more diverse economy. 0:23:31.720 --> 0:23:33.920 So I think with the minerals, I mean, I hope 0:23:33.920 --> 0:23:38.480 that that governments are learning some of the lessons from 0:23:38.520 --> 0:23:43.080 previous commodity cycles. I don't say for a moment that 0:23:43.160 --> 0:23:46.680 Africa shouldn't think about its commodities. If you can sell it, 0:23:47.160 --> 0:23:49.760 you should. One of the big questions going forward will 0:23:49.800 --> 0:23:55.640 be whether governments managed to exercise bargaining power to have 0:23:56.080 --> 0:24:03.080 minerals used for manufacturing. Within their efforts to do this 0:24:04.160 --> 0:24:08.360 around the seven main minerals that are used in battery production. 0:24:09.000 --> 0:24:13.199 It isn't yet clear what that's going to lead to, 0:24:13.960 --> 0:24:16.560 but it can obviously make a big difference. I mean, 0:24:16.640 --> 0:24:22.440 Jakoi and Indonesia was pretty successful in negotiating with Chinese 0:24:22.520 --> 0:24:26.439 companies in particular for local manufacturing production if they wanted 0:24:26.480 --> 0:24:31.640 access to nickel and other minerals that the Indonesians produce. 0:24:31.760 --> 0:24:35.240 So we just have to wait and see if African 0:24:35.280 --> 0:24:38.479 governments can replicate that, and I think that for me 0:24:38.600 --> 0:24:43.399